The Federal Reserve Board today announced its approval of the proposal of Stockman Financial Corporation, Miles City, Montana, to acquire all the voting shares of Terry Bancshares, Inc., and thereby acquire its subsidiary bank, State Bank of Terry, both in Terry, Montana.

Attached is the Board's Order relating to this action.

Stockman Financial Corporation
Miles City, Montana

Order Approving the Acquisition of a Bank Holding Company

Stockman Financial Corporation ("Stockman Financial"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire all the voting shares of Terry Bancshares, Inc. ("Terry Bancshares"), and thereby acquire its subsidiary bank, State Bank of Terry, both of Terry, Montana.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 25,042 (1999)). The time for filing comments has expired, and the Board has considered the proposal in light of the factors set forth in section 3 of the BHC Act.

Stockman Financial is the sixth largest depository institution in Montana, controlling $302.8 million in deposits, representing 3.4 percent of total deposits in depository institutions in the state.1 Terry Bancshares is the 49th largest depository institution in Montana, controlling $31.8 million in deposits, representing less than 1 percent of the total deposits in depository institutions in the state. On consummation of this proposal, Stockman Financial would remain the sixth largest depository institution in Montana, controlling deposits of $334.6 million, representing 3.8 percent of the total deposits in depository institutions in the state.

Competitive Considerations
The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed combination that would substantially lessen competition or tend to create a monopoly in any relevant banking market, unless the Board finds that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.2

Stockman Financial and Terry Bancshares compete directly in the Miles City, Montana, banking market.3 Stockman Financial is the largest depository institution in the Miles City banking market, controlling deposits of $117.1 million, representing 27.5 percent of the total deposits in depository institutions in the market ("market deposits").4 Terry Bancshares is the fifth largest depository institution in the market, controlling market deposits of $31.8 million, representing 7.5 percent of market deposits. On consummation of this proposal, Stockman Financial would control market deposits of $148.9 million, representing 35 percent of market deposits. Concentration in the market, as measured by the Herfindahl-Hirschman Index ("HHI"), would increase by 411 points to 1808.5

In evaluating the competitive effects of the proposal in the Miles City banking market, the Board has considered several factors. The Miles City banking market is a relatively small rural market in southeastern Montana and ten competitors of Stockman Financial would remain in the market after consummation of the proposal, including three large multistate bank holding companies. Five of the ten depository institutions that would compete with Stockman Financial after consummation would each have a market share of more than 5 percent. The Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal would not likely have any significantly adverse competitive effects in the Miles City banking market or any other relevant banking market.

Based on all the facts of record, the Board concludes that consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the Miles City banking market or any other relevant market.

Other Factors
The BHC Act also requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal, the convenience and needs of the communities to be served, and certain supervisory factors. The facts of record include supervisory reports of examination assessing the financial information provided by Stockman Financial. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of Stockman Financial, Terry Bancshares, and their respective subsidiary banks, are consistent with approval, as are the other supervisory factors the Board must consider under section 3 of the BHC Act. In addition, considerations relating to the convenience and needs of the communities to be served, including the records of performance of the institutions involved under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.), are consistent with approval of the application.

Conclusion
Based on the foregoing, and in light of all the facts of record, the Board has determined that the application should be, and hereby is, approved. The Board's approval is specifically conditioned on compliance by Stockman Financial with all the commitments made in connection with this application. For purposes of this action, the commitments and conditions relied on by the Board in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The acquisition of Terry Bancshares shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Minneapolis, acting pursuant to delegated authority.

3
The Miles City banking market is defined as Carter, Custer, Fallon, Garfield, Powder River, Prairie, and Rosebud Counties, all in Montana.

4
Market share data are as of June 30, 1998. Market share data are based on calculations that include the deposits of thrift institutions weighted at
50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See, e.g., Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board regularly has included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian Inc., 77 Federal Reserve Bulletin 52 (1991).

5
Under the Merger Guidelines of the Department of Justice, 49 Federal Register 26,923 (June 29, 1984), a market in which the post-merger HHI is more than 1800 is considered to be highly concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial institutions.